PATIENTS admitted to psychiatric hospitals as teenagers are often still in care more than 40 years later, with some being discharged into nursing homes despite wanting to go home.

A review by the state Ombudsman found about a third of psychiatric patients living in mental health facilities did not need to be there, but could not be discharged because no accommodation was available.

The NSW Ombudsman, Bruce Barbour, said it it was ''Dickensian'' to keep those people in hospital and it meant already stretched mental health facilities were unable to accommodate new, severely unwell patients.

''Our inquiry identified people aged 24 and 25 years who are capable of living in the community with the right support and who have already been in hospital for over five years,'' Mr Barbour said. ''It is unacceptable that these young people may be facing a similar future to others in our review who were admitted to hospital as teenagers and only left when they were discharged to aged-care facilities.''

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As part of the inquiry, the files of 95 people in 11 mental health facilities across NSW were reviewed, and almost 300 stakeholders were consulted. Of the patients, 13 had been institutionalised for more than 20 years.

In one case, a 44-year-old man with schizophrenia, depression and cognitive impairment had been in hospital for seven years but wanted to move back to his home, a country town. But with no accommodation available to meet his needs, he was unable to leave the hospital where he remains today.

Current disability sector reforms, including planning for the national disability insurance scheme, provided an ideal opportunity for the Department of Family and Community Services and the state Health Department to ''stop passing the buck'', Mr Barbour said.

''There are a comprehensive range of reasons we identified as to why this is happening,'' Mr Barbour said. ''But the ongoing debate between the two departments as to which agency has responsibility for providing support is a major impediment. There may be two agencies but there is only one government.''

In NSW, there are 1.9 community residential beds staffed 24 hours per day per 100,000 people, well short of the national average of 7.4 beds. Under the Disability Services Act, people with a primary diagnosis of mental illness are excluded from funded accommodation, which Mr Barbour described as a breach of human rights.

''These individuals ought not to be excluded from disability services on the basis of their mental illness, or have to remain in hospital as a result of agencies not working together to meet their needs,'' he said.

The Department of Family and Community Services said greater integration of mental health services with existing disability service models would be needed to provide appropriate support.

On Tuesday, the National Mental Health Commission's inaugural national report card on mental health was released and found Australia was failing in its delivery of mental health services.

''Our findings sit very comfortably with the report card released on Tuesday by the commission, but focuses on one particular area which is psychiatric patients,'' Mr Barbour said. ''But it's telling same story, that alternatives to hospitals for the mentally ill must be a priority.''